SSA Global announced plans Wednesday to acquire Epiphany and Unica made its initial public offering, signifying power shifts in the marketing side of the CRM industry that could mean the disappearance of Epiphany from the space in which it was once dubbed a leader. "Often, there's a question whether a startup's eventual goal is to be bought out by another company or to go public, but it was never a question with Unica--they always intended to have an IPO," says Gareth Herschel, research director for Gartner.
Herschel attributes the enterprise marketing company's success to a combination of good timing and good management. "Unica started as a data mining company, and it shifted its focus to campaign management just when other early vendors in that market started to stumble. Other vendors were talking up the market, but their offerings weren't mature enough to fill the demand."
Unica has been growing steadily since its founding in 1992 and has been building toward the IPO milestone ever since. "The marketing side of the CRM industry is expanding very quickly at the moment, and this move will improve Unica's ability to execute its strategy," says Eric Schmitt, principal analyst for Forrester Research.
Unica filed to become a public company late last year and began trading on Wednesday under the Nasdaq ticker UNCA, with an initial offering price of $10.00 per share of common stock and 4.8 million shares. Though SEC regulations prevent Unica from discussing the IPO at this time, a company statement indicated that the proceeds of this offering would be used "to pay, in accordance with its charter, $1.0 million to certain preferred stockholders," as well as for working capital and capital expenditures.
Meanwhile, Epiphany, which serves 35 percent of the Fortune 100, finds itself moving in the other direction: Its most recent financial quarter resulted in an 18.1 percent decrease in revenue compared to the same period the previous year, a period that also resulted in losses for the company. Six-month figures showed a similar trend, with revenue declining 19.2 percent. Schmitt characterized the reasons for Epiphany's decline as an excess of ambition. "Epiphany grew quickly during the dotcom bubble, but the burst caused them a number of setbacks," Schmitt says. "They staked out a lot of turf for a company of their size; they competed directly with Siebel, but without anywhere near their resources."
SSA's intent to acquire Epiphany was announced the same day as the disappointing returns, after market close. The deal, subject to stockholder and regulatory approval, will be an all-cash transaction of $329 million, with each stockholder receiving $4.20 per share. The acquisition fits well with SSA's history and strategy, according to CTO Cory Eaves. CEO Mike Greenough's strategy since he joined the company has been to aggressively acquire and grow market share, according to Eaves. "Epiphany represents an opportunity for us--while we do 83 percent of our business in areas like manufacturing and others where ERP is often deployed, the other 17 percent is in finance, telecommunications, and retail, where Epiphany has traditionally been strong. It will only make us stronger," he says. He indicates that existing Epiphany applications will get rolled into the two main SSA product lines, SSA CRM and SSA Technology Architecture.
Unica and Epiphany operate in the same space, but the news of one is not likely to affect the other, according to Schmitt. "When you get under the hood the two companies appeal to very different types of customers," he says. "Unica has been popular among companies with complex, sophisticated needs, where the IT department has a do-it-yourself mentality. Epiphany is more popular with those who need real-time marketing in the call center, for campaign management with inbound calls, and can use a solution out of the box as long as it's good."
Herschel sees a darker future for Epiphany, however. "The acquisition is a way to strengthen SSA, not to reestablish Epiphany. This is the end of Epiphany as a vendor in this market." He believes that SSA's challenge will be to explain to Epiphany's customer base just how an ERP vendor can add value to the product, but says that the move is not a big risk for the company. "It's not a large part of their business to begin with," Herschel says. "Add to that the fact they're paying a minimal premium over the stock price, and the payout is backed up by Epiphany's substantial cash reserves, and it looks like SSA Global is taking wise advantage of an opportunity."
Related articles:Aprimo Acquires DoubleClick's EMS UnitTransforming Your Marketing into a Valued Customer ServiceMarketing Automation Hits the Mark